Europe oil/products: Oil products ignore the rally in Brent
London (Quantum Commodity Intelligence) - Brent's surge Tuesday was almost one way only amid a broad market rally that also saw the FTSE close near a 16-month high and Europe's Stozz 600 post the longest winning streak in two years.
After flatlining in Asian trading hours, August Brent firmed to $73.73/b by 1630 UK time, up $0.46/b from the same time Monday.
Crude prices continued to gain afterwards against a backdrop of the talks between Iran and the international community in Vienna over its nuclear program, which looks unlikely to conclude with a breakthrough ahead of the June 18 Iranian elections.
But the major oil products of gasoline, diesel and jet fuel in Europe trailed behind the rise in crude, posting just small single-digit rises in $/mt, or a handful of cents in terms of barrels.
Flat prices for propane cargoes arriving into north Europe ignored crude to slide lower.
Russel Hardy, the head of private trading house Vitol, said he expected oil prices to move from $70 to 80/b this year – a forecast that does not stray from recent projections made by Goldman Sachs and other analysts who predict sluggish supply will be outweighed by a global economic recovery.
Products
There was a sharp change in the spread for naphtha between July paper for European cargo into north Europe and the Far East Index into Japan, dropping from -$27/mt on Monday to -$31 Tuesday. There was a similar move between July naphtha cargoes and propane cargoes, dropping from -$69/mt to -$75/mt.
After a bid on Friday, naphtha cargo prices in northern Europe have been left in wide backwardation to the July paper. July and August paper both gained $0.75/b ($00.08) by 1630 UK time, trailing sharply behind Brent. Naphtha spot prices were also pegged $0.75/mt higher, in line with paper, but the spread between spot and paper will likely start to narrow this week, given the shift in relationship with the far east index and propane.
Eurobob E5 gasoline was best reflected by early morning trades, where barges changed hands at -$3/mt versus July paper. The market has been as weak as -$5/mt versus front-month paper last week. The spread is widening sharply to E10, which traded at $4/mt above July paper. Gasoline cracks continued to soften versus Brent, extending a long term trend.
Jet fuel cargoes were clearly defined by an offer at $20/mt and a bid at $18/mt above July LSG. Against the contango in the curve, the market is bid and offered at -$4 for prompt loading in July and bid at -$3 for mid-July dates. Jet barges are flattish to cargoes and traded at flat to the forward cargo curve Tuesday, and were also offered at $19/mt above July futures.
Trade remains thin for diesel barges in ARA, brokers noted. "Reduced trading volumes of distillates in the ARA hub are causing owners to be covered only on the spot," Riverlake pointed out. "Freights suffered first drop in a month's time," they added.
Rotterdam to Amsterdam or Antwerp freight rates were pegged at €1.85/mt Tuesday, down €0.05/mt from Monday. The 50ppm barge market was bid at -$5/mt. Low Sulfur Gasoil futures lagged behind the rally in Brent, softening cracks values in the middle distillate complex.
Fuel oil trade was average and the range was very tight. Some 16,000 mt changed hands in HSFO between $392.25 and $392.50/mt. Some 14,000 mt changed hands in marine fuel (0.5% sulfur) at around $504 and $504.25/mt.